The Supreme Court of Canada's approach to the recovery of ultra vires taxes: at the border of private and public law.

I INTRODUCTION

II THE RESTITUTION OF ULTRA VIRES TAXES: THE CANADIAN
LAW PRIOR TO KINGSTREET
   Amax Potash
   Air Canada v. British Columbia
   Air Canada v. Ontario (LCBO)
   Re Eurig Estate
   Summary

III KINGSTREET V. NEW BRUNSWICK (DEPARTMENT OF FINANCE)
   Facts
   At Trial--The New Brunswick Court of Queen's Bench
   On Appeal--The New Brunswick Court of Appeal
   At the Supreme Court of Canada
     The Death of the Immunity Rule from Air Canada
     The Relationship between Constitutional and Restitutionary
     Principles
     The 'Passing On' Defence
     Limitation Periods and Ultra Vires Taxation

IV  NARROWING THE REACH OF KINGSTREET: CANADA (ATTORNEY GENERAL)
V. HISLOP

V CONCLUSION: THE RESTITUTION OF ULTRA VIRES TAXES
GOING FORWARD

Abstract

This article explores the Supreme Court of Canada's approach to the recovery of ultra vites taxes in two recent cases, Kingstreet Investments Ltd. v. New Brunswick (Department of Finance) and Canada (Attorney General) v. Hislop. Ultra vires taxation refers to the collection of taxes by a government when those moneys are levied pursuant to an unconstitutional statute, regulation or order-in-council, or by a statutory authority acting outside of the bounds of its enabling legislation.

The article argues that in Kingstreet, the Supreme Court correctly adopted an essentially constitutional law rather than a restitutionary or private law framework in deciding cases of ultra vires taxation. This framework was appropriate given the fundamental constitutional principles at stake--no taxation without representation and the rule of law. It is further argued, however, that because these fundamental constitutional principles are at issue, the recovery of ultra vires taxation should not have been categorized as a separate, third branch of the law of restitution by the Court; nor should the recovery of ultra vires taxes have been made subject to ordinary statutory limitation periods. Furthermore, although the Court was correct in holding that the 'passing on' defence was inapplicable in cases of ultra vires taxation, the article notes that the decision in Kingstreet may undermine the use of the defence in other areas of the law.

The article also argues that Hislop unduly restricts the scope of the reasoning in Kingstreet that ultra vires taxes should be recoverable by the taxpayer. By holding that Kingstreet does not apply in cases where unjust enrichment of the state has occurred through compulsory benefit schemes, Hislop severely limits the circumstances in which payments made to the state pursuant to an unconstitutional statute may be recovered.

Resume

Cet article explore l'approche de la Cour Supreme du Canada pour recuperer les taxes ultra rires dans deux cas recents, Kingstreet Investments Ltee c. le Nouveau-Brunswick (Ministere des Finances) et Canada (Procureur general) c. Hislop. L'imposition ultra vires porte sur le recouvrement de l'impot par un gouvernement lorsque l'imposition est effectuee selon un reglement, un decret, ou une loi anticonstitutionnelle, ou une autorite legislative qui agit en dehors des limites de son mandat.

L'article avance que, dans Kingstreet, la Cour Supreme a adopte une loi essentiellement correcte d'un point de vue constitutionnel, au lieu d'un cadre base sur la restitution ou sur le droit prive, pour rendre jugement dans les cas d'imposition ultra vites. Cette approche est appropriee, etant donne les principes constitutionnels fondamentaux impliques--pas de taxation sans representation, et la primaute d'un Etat de Droit. Cependant, l'argumentation continue puisque, etant donne les principes constitutionnels fondamentaux qui sont en question, la Cour n'aurait pas du classifier la recuperation d'imposition ultra vires separement en tant que troisieme ramification de la loi sur la restitution; la recuperation de taxes ultra vires ne devrait pas non plus etre assujettie aux periodes limites statutaires conventionnelles. De plus, bien que la Cour ait pris la bonne decision en jugeant que la defense de "passing on" etait inapplicable dans les cas de taxes ultra vires, l'article indique que la decision dans Kingstreet pourrait limiter l'emploi de la defense dans d'autres aspects de la loi.

L'article avance aussi que Hislop limite excessivement la portee du raisonnement dans Kingstreet qui etablit que les contribuables devraient pouvoir recuperer les taxes ultra vires. En confirmant que Kingstreet ne s'applique pas aux cas ou l'enrichissement injustifie de l'etat decoule de programme d'avantages sociaux obligatoires, Hislop limite severement les circonstances ou les paiements faits a l'etat suite a une loi anticonstitutionnelle peuvent etre recuperes.

I INTRODUCTION

This article will evaluate the current Canadian law of restitution as it relates to ultra vires taxation. Ultra vires taxation refers to the collection of fees or taxes by the government when those moneys are levied pursuant to an unconstitutional statute, regulation, or order-in-council, or by a statutory authority acting outside of the bounds of its enabling legislation. The law on ultra vires taxes is on the border between public and private law. On the one hand, it implicates the following foundational concepts and principles of the Canadian constitutional order: (1) the separation of powers between the judiciary, legislatures, and the executive; (2) the division of powers between the federal and provincial governments; and (3) the rule of law. On the other hand, levying ultra vires taxes leads taxpayers to seek recovery for moneys unconstitutionally collected by the state. Cases of ultra vires taxation are therefore also about justice between the opposing parties in a private law action for the restoration of those moneys paid to the government. Allowing governments to retain ultra vires taxes is essentially to condone arbitrary state action or, in other words, to permit governments to do what is legally impermissible. The underlying importance of the Canadian law on ultra vires taxation is the fact that it establishes whether arbitrary state action will be countenanced.

Two recent decisions of the Supreme Court of Canada have dramatically altered the law in this area. In Kingstreet Investments Ltd. v. New Brunswick (Department of Finance) the Court clarified to a great extent the enormous confusion surrounding the state of the law on the restitution of ultra vires taxes. Kingstreet was unequivocal that ultra vires taxes must be recoverable. Otherwise, serious harm is done to constitutional principles and the rule of law. Canada (Attorney General) v. Hislop involved the right of saine-sex survivors to their deceased partners' Canada Pension Plan payments. (2) In Hislop, the Court distinguished Kingstreet, and did so on the basis that cases regarding ultra vires taxes are fundamentally different from cases such as Hislop, which concern government benefits and programs.

This article will argue that Kingstreet was rightly decided in opting to assess cases of ultra vires taxes through constitutional rather than private law principles and in holding in favour of recovery by the taxpayers. That the recovery of ultra vires taxes legitimately constitutes a third branch of restitution law as Bastarache J. decides is less defensible. Justice Bastarache also appropriately rejected the use of the 'passing on' defence. He attempted to narrow the impact of the judgment by stating that his critique of the passing on defence should apply only to the realm of ultra vires taxes. The reasons offered by the Court in rejecting the defence, however, are persuasive and suggest that passing on is unlikely to persist as a valid defence in the law of restitution more generally. It is problematic, however, that the Court limited recovery in Kingstreet to the six-year period prescribed by the New Brunswick Limitation of Actions Act. (3) The Act should instead have been read down so that an ordinary statute does not allow the province to do indirectly what it is constitutionally barred from doing directly.

Hislop, it will be argued, unjustifiably narrowed the scope of Kingstreet. Hislop was decided on s. 15 equality rights under the Canadian Charter of Rights and Freedoms. (4) It was not decided on principles of unjust enrichment. Kingstreet created the strong presumption for the recovery of any unjust enrichment by the state. The reasoning in Kingstreet could potentially have been extended beyond cases involving ultra vires taxes to those of unjust enrichment by the state through contributory benefit programs. By distinguishing cases of ultra vires taxation from those concerning government benefits, Hislop limited this strong presumption of recovery to a much narrower subset of cases than was necessary or desirable.

This article will provide an in-depth study of the Canadian law on ultra vires taxation. It will first assess the state of the law on the restitution of ultra vires taxes prior to the Court's decision in Kingstreet. Kingstreet is in many ways a reaction to the incoherence and inconsistency of the previous case law. All of the issues dealt with in the case were anticipated in the earlier case law. It is therefore necessary to deal with the major cases prior to Kingstreet in detail. Second, it will consider Kingstreet and the implications stemming from the decision. Third, it will assess the impact of Hislop on the law of unjust enrichment by the state.

II THE RESTITUTION OF ULTRA VIRES TAXES: THE CANADIAN LAW PRIOR TO KINGSTREET

This section will highlight the major cases on ultra vires taxation prior to Kingstreet as they set the stage for the Supreme Court's decision. The state of the law on the restitution of ultra vires taxes before Kingstreet was soundly criticized as incoherent. (5) At best, its application by Che courts could be described as inconsistent. There were strands within the law prior to Kingstreet that strongly articulated the arguments in favour of restitution. There were others which were hostile to restitution of the taxes and instead concluded in favour of retention by the state. It was the latter position which was generally victorious in Canadian courts. The four major cases discussed here foreshadow key issues in the Kingstreet decision: the arguments in favour and against the restitution of ultra vires taxes, the complex inter-relationship between public and private law considerations, the validity of the 'passing on' defence, and the applicability of statutory bars to recovery.

Amax Potash 

The Supreme Court dealt with the issue of ultra vires taxes as early as 1977 in Amax Potash Ltd. v. Government of Saskatchewan. (6) The province of Saskatchewan imposed a tax on potash producers. They subSequently feared that the tax could be correctly characterized as an indirect tax. Under the Constitution Act, 1867, s. 92(2), provinces may only levy direct taxes. (7) Indirect taxation is under the exclusive purview of the federal government under s. 91(3). (8) The taxation scheme was therefore likely to be unconstitutional as ultra vires the province. To pre-empt any action for restitution of what was likely an ultra vires tax, the province enacted the Proceedings Against the Crown Act. (9) Section 5(7) of the Proceedings against the Crown Act barred the recovery of the moneys paid to Saskatchewan in the event that the tax was found to be ultra vires. The legislation was specifically enacted to prevent recovery by the potash producers. At issue in the judgment was hOt whether the potash tax itself was ultra vires, but whether the Proceedings Against the Crown Act was unconstitutional for barring the potential recovery of ultra vires taxes.

Justice Dickson, writing for the Court, acknowledged that there were no applicable precedents on point in Canadian law. The Court was faced with a novel legal problem. He held that barring the recovery of taxes collected pursuant to an ultra vires statute was impermissible. It would allow a province to do indirectly what the Constitution prevented it from doing directly:

   To allow moneys collected under compulsion, pursuant to an ultra
   vires statute, to be retained would be tantamount to allowing the
   provincial Legislature to do indirectly what it could not do
   directly, and by covert means to impose illegal burdens. (10)

The provisions of the Act barring the restitution of the taxes were thus struck down on the reasoning that "if a state cannot take by unconstitutional means it cannot retain by unconstitutional means". (11)

The decision in Amax Potash is a clear statement of the constitutional imperative for the recovery of ultra vires taxes. Justice Dickson does hot find that the provincial tax is ultra vires, but clearly prohibits the enactment of specific bars to recovery. The judgment does not contemplate the relation between a private law right of restitution and public law or public policy concerns that may vitiate that right. Constitutional principles alone govern the issue. Notably, the decision does not consider the constitutionality of general limitations statutes. If applied, general limitation statutes may also bar the recovery of ultra vires taxes, just like the specific statutory bar found unconstitutional here. The applicability of general limitation statutes only became an issue in Kingstreet thirty years later.

Air Canada v. British Columbia 

Much of the confusion in the lower courts on the law regarding ultra vires taxes stems from a decision of the Supreme Court in 1989, Air Canada v. British Columbia. (12) The case inspired three separate judgments by the Court. Justice La Forest wrote for himself and two other justices, Beetz J. concurred with the majority decision for himself and one other, and Wilson J. dissented. Justice Le Dain took no part in the judgment. Several airlines were seeking the restitution of moneys paid under a gasoline tax since 1974. The Court ruled that the tax was in actuality a direct tax, validly enacted by the provincial government. In his judgment, La Forest J. abolished the distinction between mistake of law and mistake of fact, which prior to Air Canada had been relevant. The law had previously barred restitution in cases of mistake of law, but La Forest J. dismissed this rule as lacking in clarity and being unduly harsh. On this point, Air Canada was a welcome clarification.

Justice La Forest's judgment, however, also deals at length in obiter with the general legal framework applicable to claims of restitution for ultra vires taxes. This section is the most often-cited and heavily criticized part of the decision. Ultra vires taxation, he held, carries with it special policy concerns which necessitate a legal analysis removed from the regular restitutionary framework. Taking into account these policy concerns, he posited a broad immunization rule barring the recovery of ultra vires taxes levied pursuant to an unconstitutional piece of legislation. Under this rule, the province or federal government should be immune from having to repay such taxes because of the need to protect the government's discretion over the treasury and to prevent the risk of fiscal chaos. He decided that if a long-standing tax is ruled ultra vires, then having to repay the moneys would unduly harm the government's ability to decide on public priorities and to build the schools, roads, and hospitals that serve the public interest. In his view, allowing recovery by a few private individuals or corporations would jeopardize the protection of the public interest. Private right, in his conception, must yield to policy concerns in the public interest.

The portion of the judgment most criticized by scholars of unjust enrichment involves La Forest J.'s acceptance of a passing on defence. (13) The passing on defence permits a party which has been unjustly enriched to retain the moneys if the claimant has passed on the cost to another party. Restitutionary principles only allow recovery, in La Forest J.'s assessment, where there has been an actual loss. If a business passes on the cost of an ultra vires tax to consumers in the form of higher prices, then the business has not actually suffered any loss in his view. On this account, if there has been no loss, then no recovery is permissible as it would simply provide a windfall to the claimant. It is worth noting that by applying the passing on defence here, La Forest J. introduced a novel concept into Canadian law. This defence has been highly controversial ever since.

Air Canada v. Ontario (LCBO)

In Air Canada v. Ontario (Liquor Control Board of Ontario), the Supreme Court ordered the restitution of gallonage fees collected by the LCBO from airlines selling alcohol on airplanes. (14) The provincial statute authorizing such fees had been misapplied to include the gallonage fees charged to the airlines. The province conceded that restitution was owed for the fees collected after January 1, 1984. Justice Iacobucci decided that the province was obliged to restore all the moneys collected prior to that date as well.

Air Canada v. Ontario (LCBO) is an important statement in the context of fees levied by a misapplied statute. Rather than being ultra vires in a constitutional sense, such fees are invalid according to administrative law. The decision does not permit any deviations from the principle that unjust enrichment by the state is recoverable, at least in the administrative law context. In other words, Iacobucci J. had rejected the existence of bad faith as a precondition for restitution when a fee arose from the misapplication of an otherwise valid statute. He further decided that the parties subject to the law were under no obligation to ensure that the statute was applied correctly. This was the sole responsibility of the government. The sophistication of the parties seeking restitution--the airlines in this case--was irrelevant.

Re Eurig Estate

Re Eurig Estate clarified the remedies available to courts and the options available to legislatures when a tax is determined to be ultra vires. (15) The majority of the Supreme Court in Re Eurig found that probate fees were a direct tax and were, therefore, intra vires the Ontario government. The tax remained unconstitutional, however, because it violated s. 53 of the Constitution Act, 1867. Section 53 requires that taxation bills originate in the House of Commons or in the provincial legislature. The probate fees were found to be a tax imposed by the Lieutenant Governor in Council without the clear and unambiguous authorization of the legislature. As a result, the Court granted a suspended declaration of invalidity for six months. The reasoning was that the government required time to respond to the finding of unconstitutionality against a source of revenue on which it had long depended. The dissent and concurring judgment deviated from the majority's interpretation of s. 53, but not on the potential availability of suspended declarations of invalidity as a remedy.

The options available to courts and legislatures upon a finding that a tax is ultra vires mitigate to a great extent concerns of fiscal chaos as enunciated in Air Canada. Re Eurig confirmed the availability of suspended declarations of invalidity. It also, however, reinforced the options that governments have in the face of a finding that a tax is ultra vires; they are often able to repackage the tax in constitutional form and apply it retroactively. In Re Eurig, the province responded in exactly this way by enacting the tax in a valid fashion before applying it retroactively. The unconstitutional probate fees were repackaged in a constitutionally valid form and imposed upon the same parties.

The potential disruptive impact of the recovery of unconstitutional taxes is minimized by the availability of suspended declarations of invalidity by courts and the retroactive imposition of valid taxation by legislatures. These options dramatically reduce, if not eliminate, the potential for fiscal chaos, as long as there is a potentially valid way for the tax to be re-imposed. The availability of both suspended declarations of invalidity and valid retroactive taxation legislation factored strongly into Bastarache J.'s reasoning in Kingstreet.

Summary

The state of Canadian law prior to Kingstreet was inconsistent and lacked a clear framework. A common law bar on the recovery of ultra vires taxes, the existence of the defence of passing on, and a policy concern with fiscal chaos stemmed from Air Canada. The case of Amax Potash clearly prevented specific, statutory bars to recovery, though the principles favouring recovery as articulated in the case were not picked up by La Forest J. in Air Canada. Subsequently, Re Eurig confirmed that suspended declarations of invalidity by courts and the imposition of valid, retroactive taxation statutes by legislatures provided a wide range of options to minimize disruptions caused by the recovery of ultra vires taxes. A distinction was drawn, however, between the recovery of taxes that were ultra vires under constitutional law and invalid pursuant to administrative law. The recovery of unconstitutional taxes was largely barred by Air Canada while restitution was available for taxes or fees that were illegal in an administrative law sense under Air Canada v. Ontario (LCBO). This was an untenable situation. If anything, the reasoning in favour of restitution was stronger in cases of unconstitutionality than it was in cases of misapplied statutes. It is the Constitution, not administrative law, that is the supreme law of the land. Given this background, Kingstreet was an eagerly anticipated opportunity for the Supreme Court to reform the law of ultra vires taxation in Canada.

III KINGSTREET V. NEW BRUNSWICK (DEPARTMENT OF FINANCE)

Facts

In Kingstreet, several bar and night club owners in the province of New Brunswick launched an action to recover fees charged by the New Brunswick Liquor Corporation. The bar and night club owners were licensed to sell alcohol in the province. They purchased alcohol from the provincial liquor retail stores operated by the Corporation. The owners were required to pay the retail price, but were also obliged to pay an additional user charge pursuant to a regulation of the New Brunswick Liquor Control Act. (16) This user charge had varied between 5 per cent and 11 per cent of the retail price since the bar owners began operating in 1988. The total amount of moneys paid was agreed by the parties to be over $1 million. It was also agreed at trial that the user fee far exceeded the amount needed by the province to recoup the costs of administering the licensing scheme.

At Trial--The New Brunswick Court of Queen's Bench 

The bar owners were unsuccessful in attaining relief at trial. (17) The trial judge, Russell J., applied the general common law rule against recovery and the defence of passing on articulated by La Forest J. in Air Canada. He held that bar patrons had in actuality paid the cost of the user fee in the form of higher prices. The user fee had been passed on by the bar owners to their consumers, hence no relief was available. The avoidance of fiscal turmoil was a notable consideration for Russell J. in denying recovery.

On Appeal--The New Brunswick Court of Appeal

The majority decision of Robertson J.A. at the Court of Appeal rejected the common law bar to recovery from Air Canada, but recognized the defence of passing on. (18) He held that restitutionary principles prevented a plaintiff from gaining a windfall. If restitution was ordered, the bar owners would receive such a windfall because they had passed on the cost of the user fee to their customers. Furthermore, if the province was forced to restore the fee to the bar owners, the bar patrons would effectively be charged twice--once as bar patrons and a second rime as taxpayers in New Brunswick. The private interest of the bar owners would be advanced at the expense of the public interest represented by the province. This would be an inequitable result in the view of Robertson J.A.

The majority accepted the existence of certain exceptions to the defence of passing on that would allow recovery. The framework Robertson J.A. adopted included a rebuttable presumption that passing on had not occurred where a tax had been declared ultra vires. It would therefore rest with the government to prove that the tax had been passed on, and that the government was therefore entitled to retain the moneys in question. In addition, Robertson J.A. held that exceptions for protest and compulsion exist. The defence of passing on would be inapplicable if the plaintiff had protested the payment of the moneys in question or was under compulsion to pay the fee. He ruled that the commencement of legal proceedings on May 25, 2001 was sufficient protest to engage the exception. Therefore, bar owners were eligible to recover the moneys paid after the protest filed on May 25, 2001, but not those paid before that date. The defence of passing on, in his decision, did not allow recovery until such a protest occurred. This meant that the majority acknowledged the tenuous existence of the passing on defence in Canadian law. In the alternative that the defence did not exist, Robertson J.A. held that all of the moneys should then be restored to the bar owners subject to the six year limitation period within the provincial limitations statute.

In dissent, Ryan J.A. held that the claim for restitution should be barred as the owners had passed on the cost of the user charge to consumers. Ryan J.A. held that when a charge had been passed on, no corresponding deprivation had occurred, so a claim of unjust enrichment could not be made out.

At the Supreme Court of Canada

Justice Bastarache wrote for a unanimous Supreme Court. The Kingstreet ruling reformed important areas of both private and public law. (19) It fundamentally reshaped the law on ultra vires taxation and employed reasoning likely to have a broad impact on the general law of restitution. In the decision, Bastarache J. rejected the immunization rule of La Forest J. from Air Canada and decided the case on constitutional principles.

The decision is important in four respects: (1) its rejection of the immunity rule; (2) its treatment of the relationship between constitutional and restitutionary principles and subsequent categorization of ultra vires taxation cases; (3) its rejection of the passing on defence; and (4) the application of the New Brunswick limitations statute. The next section of the article will deal with each of these significant aspects of the decision in turn.

The Death of the Immunity Rule from Air Canada

The immunity rule from Air Canada barring the recovery of ultra vires taxes was an example of extreme deference shown by the Court to governments. It allowed the state to appropriate moneys without proper authorization. Even if a tax was ruled ultra vires, there was no remedy for the plaintiff. Justice La Forest justified this in Air Canada by saying that ultra vires taxation must not be recoverable if we wish to avoid fiscal chaos. He thus effectively limited the rights of individuals seeking recovery, in order to avoid the unrealized danger that repaying the ultra vires taxes would so weaken the treasury as to cause veritable fiscal chaos.

This reasoning is extremely problematic. As Professor Birks has written, "a merely hypothetical danger of disruption certainly does not warrant an undiscriminating denial of restitution". (20) The judgment of La Forest J. in Air Canada was so wary of undermining long-standing sources of government income that individual rights were sacrificed to policy concerns--namely fiscal chaos--outside of the law of restitution. Though the immunization rule had only ever been endorsed by four of nine Supreme Court justices, it had been applied since Air Canada with regularity.

The decision of Bastarache J. in Kingstreet finally ends this unsatisfactory state of affairs. Justice Bastarache began by describing the retention of unconstitutionally collected taxes by the state as an "injustice". (21) He recognized in the judgment that La Forest J. did not actually speak for a majority of the Court in positing the immunization rule. Accordingly, Bastarache J. favoured the dissent of Wilson J. in Air Canada that permitted recovery.

Kingstreet acknowledges the essential constitutional norms that are in play when ultra vires taxes are levied. Justice Bastarache decided that to bar recovery would violate the rule of law, which he described as "this most fundamental constitutional principle". (22) It would further undermine the principle of "no taxation without representation [that is] central to our conception of democracy and the rule of law". (23)

These two principles--the rule of law and no taxation without representation--are constitutionally sound. Taxation measures must be approved by the legislature. They cannot be enacted by the executive alone without proper authority from the legislative body. This is enunciated in ss. 53 and 90 of the Constitution Act, 1867, (24) as well as the Bill of Rights (1688) (25) enacted by the British Parliament and received into Canadian law. In broad strokes, the executive must call the legislature into session to enact taxation, and only those taxes approved by the legislature may be levied. A tax that is not approved by the legislature or which goes beyond the scope of what is approved by the legislature is impermissible. These constitutional guarantees had developed as a basic check on the arbitrary actions of governments. They compel the Crown to obey the rule of law. (26)

Correctly interpreted, they also compel recovery if the taxes are ultra vires in a constitutional sense or are the result of a misapplied statute. It should make no difference whether a tax is levied pursuant to an unconstitutional statute or levied by an administrative agency acting outside of the bounds of its enabling statute. In either case, the required authority from the legislature has not been given. Kingstreet recognizes this point. It eliminates the distinction in the case law between taxes that are ultra vires in a constitutional sense and those that are ultra vires under administrative law.

Air Canada v. Ontario (LCBO) established a strong rationale for why taxes that are ultra vires under administrative law should be recoverable. (27) In these situations, a public authority empowered by statute collects moneys from taxpayers without proper authorization from the enacting legislation. In other words, the authority is acting outside of the bounds of its statutory authority. In Air Canada v. Ontario (LCBO), the regulatory agency exceeded the terms of its legislative authority, so the fees it had imposed were returned to the airlines which had paid the moneys.

Justice Iacobucci in Air Canada v. Ontario (LCBO) confirmed that the moneys were collected without valid statutory authority and thus must be recoverable. The decision in Air Canada v. Ontario (LCBO) unfortunately does not detail a rationale for recovery in the administrative law context. Presumably, however, the underlying principles favouring recovery are the same whether from the perspective of administrative or constitutional law--that to bar recovery violates the principles of the rule of law and no taxation without representation. No taxation should be permitted without approval from the legislature. Kingstreet ended the arbitrary and incoherent distinction between the two types of ultra vires taxes that had dogged the case law prior to that point.

In addition to these concerns regarding legislative authority, Kingstreet also has the added dimension of federalism. The unconstitutional tax levied by the New Brunswick Liquor Corporation violated the division of powers between the federal and provincial governments. It was not merely an example, as was Re Eurig, of the Crown overstepping the authority granted to it by the legislature in the form of statute and regulation. Levying the tax was ultra vires the constitutional powers of the province. To bar the recovery of the ultra vires tax, as was done at trial, did not only damage the rule of law and the principle of no taxation without representation, but it also violated ss. 91 and 92 of the Constitution Act, 1867, (28) which divide the legislative powers between the provincial and federal governments. Only the federal legislature may authorize indirect taxation of the type imposed by New Brunswick.

Justice Bastarache, however, did not base his rejection of the immunization rule on the grounds of respecting the division of powers. Avoiding the erosion of federalism would have been another plausible reason for him to reject the immunization rule in this case. Instead, he founded his judgment in the broader principles of the rule of law, and that there should be no taxation without representation. By focusing on unconstitutional taxation in general, rather than simply taxes ultra vires the competency of one order of government, he broadened the reach of his decision. Therefore, Kingstreet applies to all cases of ultra vires taxation, including those where the executive has not received sufficient legislative authority to levy a tax under s. 53, and not just those involving the division of powers.

The Relationship Between Constitutional and Restitutionary Principles

In an action for restitution between two private parties, concerns regarding the appropriate roles of the legislature, executive, and judiciary are not relevant. Ultra vires taxation, however, raises the distinct issue of how far-reaching the courts should be in interfering with the spending prerogatives of governments. In Air Canada, La Forest J. responded to the considerations raised by cases of ultra vires taxation by introducing the policy concern of fiscal chaos as overriding the normal restitutionary analysis. Justice La Forest held that "special considerations operate to take this case out of the normal restitutionary framework". (29) In his decision, ultra vires taxes raised distinct policy concerns outside of the normal operation of private law. Air Canada did not discuss the rule of law or the idea that taxation requires representation. Instead, it grafted public policy concerns on top of the normal analysis for unjust enrichment. These policy concerns overwhelmed the private rights of plaintiffs to recover, thus leading to the development of the immunization rule. Much of the criticism of Air Canada stemmed from this mixing of private law and public policy.

In Kingstreet, Bastarache J. not only rejected the immunization rule but disagreed with La Forest J. on the appropriate use of private and public law in cases of ultra vires taxation. Whereas La Forest J. applied policy concerns to nullify the private law reasoning favouring restitution, Bastarache J. opted for a different approach. He decided that "[b]ecause of the constitutional rule at play, the claim can be dealt with more simply than one for unjust enrichment in the private domain". (30) By relying on the rule of law and no taxation without representation to eliminate the immunization rule, Bastarache J. adopted an essentially constitutional, as opposed to a private law, analysis.

Still, Bastarache J. did not wholly dispense with the framework provided by the law of restitution. He was not willing to consider ultra vires taxation as an exclusively public law issue. The decision was also based in the private law of restitution. He wrote that there were "at least two" types of restitution--restitution for wrongdoing and for unjust enrichment. (31) Justice Bastarache held that the restitution of unconstitutionally collected taxes formed a third, distinct branch of the law of restitution. He held that the case could be decided as restitution for unjust enrichment but should not, because "[t]his case raises the separate notion [from the two types of restitution] of restitution based on the constitutional principle that taxes should not be levied without proper legal authority". (32) The restitution of unconstitutional taxes is a third branch according to Bastarache J. because of the constitutional and policy concerns raised by ultra vires taxes. In his view, these policy concerns must be considered and they were inconsistent with restitution for unjust enrichment. A third category was, in his opinion, the only viable way to deal with the issue.

The creation of a "third branch" of restitution law appears to be undesirable. Cases of ultra vires taxation, like Kingstreet, should be decided on the basis of constitutional principles and should afford a public law remedy. There is no need to categorize cases of this nature as falling within either the law of restitution or private law more generally. The incoherence of the case law prior to Kingstreet largely stemmed from the attempt to solve a public law problem--namely, the collection of taxes pursuant to an ultra vires statute--via private law analyses. The application of the passing on defence and the doctrines of compulsion and protest all emerged from the private law of restitution. As applied in the earlier case law, all of these concepts did not fit well into the public law context of ultra vires taxation. Much confusion ensued. Through his categorization of recovery of ultra vires taxes as forming part of the law of restitution, Bastarache J. risked the continued melding of private and public law considerations in an equally problematic manner in the future. The underlying principle in Kingstreet, that there be no taxation without representation in order to preserve the rule of law, has the potential to be undermined as the test for restitution evolves to respond to private law rather than public law concerns.

The creation of a third branch of restitution is not just undesirable but also untenable. The potential mixing of public and private law principles is problematic largely because public law principles simply do hot fit well within a private law framework. The reasoning of Bastarache J. in itself would appear to lead to that conclusion. As he demonstrates, public law principles are not at home in either of the two established branches of restitution law. Respect for the division of powers between the federal and provincial governments, the separation of powers between the judiciary, legislature, and executive, and the protection of the treasury, are not proper concerns of private law.

The necessity of keeping public and private law distinct, at least in this context, is justified by a consideration of the roots of the two potential frameworks of analysis--the law of restitution and constitutional principles derived from ss. 53 and 90 of the Constitution Act, 1867. Public and private law necessitate different considerations, values, and emphases. The private law of restitution is "a tool of corrective justice". (33) It is about justice between the parties. Public law is another matter. As Bastarache J. writes,

   [t]he action for recovery of taxes is firmly grounded, as a public
   law remedy in a constitutional principle stemming from democracy's
   earliest attempts to circumscribe government's power within the
   rule of law. Unjust enrichment, on the other hand, originally
   evolved from the common law action of indebitatus assumpsit as a
   means of granting plaintiffs relief for quasi-contractual damages.
   (34)

Justice Bastarache's decision to evaluate cases of ultra vires taxation on constitutional principles, namely ss. 53 and 90 of the Constitution Act, 1867, would appear to stem from his recognition that ultra vires taxation is a public law rather than a private law matter. Positing a third branch of the law of restitution that is concerned with ultra vires taxation simply confuses the fact that the constitutional guarantee of no taxation without representation is the principle that ensures recovery, and not the principle of corrective justice between parties. By creating a third branch of the private law of restitution, even though constitutional principles are at stake, Bastarache J. appears to undermine the basic recognition in the case that public law should govern the issue.

To term the framework developed by Bastarache J. in Kingstreet as a component of the private law of restitution would be a misnomer. Doing so may prove dangerous if it leads us back into the doctrinal confusion characterizing the earlier cases which attempted to mix public and private law. A preferable approach would have been to apply the constitutional principles as Bastarache J. did, but also to acknowledge that the legal framework for evaluating those principles is public rather than private.

One possible counter-argument to my assertion that a constitutional framework is appropriate is that the test for unjust enrichment is sufficiently flexible to allow constitutional principles to fit comfortably within the private law framework. In Garland v. Consumers' Gas Co., (35) the Supreme Court recently pronounced a flexible scheme for unjust enrichment that does take policy considerations into account. If it can be argued that these policy considerations may include constitutional principles, then perhaps it was appropriate for Bastarache J. to create a third branch of restitution rather than opting for a purely constitutional framework.

Garland applied a two-stage analysis in establishing the existence of a juristic reason for enrichment. The existence of a juristic reason for the enrichment would result in the denial of recovery. The first stage of the Garland test required the plaintiff to demonstrate that there is no existing and established category of juristic reason for the enrichment. If it was proven that this category of juristic reason did not exist, then under the second stage of the test, the defendant had the burden of establishing another type of reason to deny recovery. At this second stage, the Supreme Court had recognized that policy considerations were relevant to proving that the defendant was not unjustly enriched. One could argue that it is through this second stage of the test that public policy considerations relevant to the recovery of ultra vires taxation could be legitimately evaluated by the courts. It would, therefore, be appropriate to keep cases of ultra vires taxation within the third branch of private law restitution and there would be no need for the separate constitutional framework argued for in this section.

Following a more thorough analysis, however, it becomes clear that the test for restitution in Garland v. Consumers' Gas cannot legitimately encompass the constitutional principles relevant to cases of ultra vires taxation. The test in Garland requires policy concerns to be evaluated, but only "proper policy considerations" (36) may be considered. Justice Bastarache acknowledged that only policy considerations appropriate to private law may be considered as "proper" in the first two branches of restitution--restitution for wrongdoing and restitution for unjust enrichment. (37) He wrote, "By proper policy considerations, I mean those that have traditionally informed the development of restitutionary law." (38)

If this is the case, it is unclear why the restoration of ultra vires taxes to the taxpayer is a third branch of the law of restitution at all. Though policy concerns certainly forma part of private law in general and the law of restitution in particular, (39) the types of concerns relevant here were of a constitutional flavour. They were not the type of policy considerations that were appropriate within a private law test. Justice Bastarache clearly acknowledged as much in his consideration of the Garland test. Given this background, there was little value in creating a third branch of the law of restitution. The normal tests and considerations involved in the law of restitution were simply not operative in the approach taken by Kingstreet, nor should they be given the constitutional considerations at stake. To characterize an analysis of ss. 53 and 90 of the Constitution Act, 1867 as part of the law of restitution, when the test for unjust enrichment from Garland had been deemed inappropriate in the context of ultra vires taxation, is to invite doctrinal confusion. It also betrays the thrust of Bastarache J.'s own arguments in Kingstreet.

Two leading private law scholars, Lionel Smith and Mitchell McInnes, have both recently argued that the traditional classification of cases of ultra vires taxation as within private law is correct and should not have been treated as a distinct third branch of the law of restitution. (40) They argue that even though constitutional principles such as the rule of law and no taxation without representation are in play at Kingstreet, the recovery of ultra vires taxation is a private law problem that requires a private law solution. To hive off cases like Kingstreet, in their view, is to undermine the coherence of the law of restitution and unjust enrichment. Smith, in particular, offers a sophisticated discussion of the relationship between the concepts of restitution and unjust enrichment, along with an analysis of the inconsistencies in the Supreme Court's decisions on the law of restitution in recent years. As for McInnes, he supports the House of Lords' recent decision in Deutsche Morgan Grenfell Group Pic. v. I.R.C. (41) as a preferable treatment of unconstitutional taxes as compared to the approach taken in Kingstreet.

Smith writes that "on either the pre-Garland or post-Garland understanding of the law of unjust enrichment, a claim to recover undue taxes was always treated as part of the law of unjust enrichment". (42) Later in the paper, he states, "It is not clear why we should have 'constitutional restitution', as opposed to using the ordinary private law of unjust enrichment, perhaps subject to some modification when the defendant is the Crown." (43)

I do not intend to enter into the debate regarding the classification of ultra vires taxation within private law. Given my argument that cases of ultra vires taxation should be decided on a public law rather than private law basis, however, I will address the major arguments that Smith makes for classifying and treating these cases as within private law. Smith makes two central arguments in rejecting a public law treatment of Kingstreet: (1) that private law doctrine should govern the recovery of ultra vires taxation in order to preserve "consistency across fields of private law"; (44) and (2) that a constitutional law framework cannot provide an adequate remedy without the use of the private law of restitution.

On his first major point, Smith argues that just as we consider misfeasance by a public office holder to be a tort and not a public law issue, so we should consider unjust enrichment by the government to be a private law issue. By labeling public misfeasance a tort and requiring proof of the elements of the tort for liability to be found, he argues, we ensure internal consistency in the law of torts. (45) Later in his argument, Smith provides further examples of breaches of contract with the state and vicarious liability for the actions of its employees as evidence of government action that is treated within private law, rather than constitutional law. (46) McInnes argues along similar lines that the state should be treated just like any other party. (47)

Though Smith's concern for consistency across areas of private law is certainly a valid one, I would like to suggest that a constitutional approach is still preferable. First, the cases prior to Kingstreet, whatever their other virtues, created tremendous uncertainty and incoherence in this area of law. I have argued that much of this incoherence stemmed from an attempt to resolve a public law problem through private law means. A private law framework is not designed to incorporate concerns about proper constitutional procedures being followed in order for taxation to be properly authorized. Neither is private law designed to regulate the relation between the executive and the legislative branches. Taxation raises constitutional issues that are not relevant in cases where the state is vicariously liable for the acts of its employees or where it acts in breach of a contract. Recovery in cases of ultra vires taxation should thus be decided with recourse to these constitutional principles; it should not be dependent on the private law test of restitution. It is not consistency within private law that should be central here, but setting the appropriate boundaries between private and public law.

McInnes argues, similarly to Smith, that the state should be treated like any other party in a private law action, including actions for recovery of ultra vires taxes. He approvingly refers to the recent House of Lords' Deutsche Morgan case for following this approach and criticizes Bastarache J. for not taking a similar tack. (48) Like Smith, McInnes' primary concern appears to be ensuring consistency within the law of restitution. Again, it is the boundaries between public and private law that are of greater concern here. The state may be appropriately considered equivalent to a private actor when it enters into a contract or its employees commit tortious acts for which it is vicariously liable. Nevertheless, ultra vires taxation implicates constitutional principles entrenched in the Constitution that are not relevant in those situations. The state may be the equivalent of an individual or a corporation in some types of actions, but it is fundamentally different from other potential parties in actions for the recovery of ultra vires taxation.

Smith's second major argument is that a constitutional approach to ultra vires taxes must fail because it cannot provide the appropriate remedy. According to him, a constitutional remedy providing for recovery would be a "free-standing public law compensation claim". (49) He argues that no such free-standing remedies can exist, except for s. 24 of the Charter, (50) which was not relied on in Kingstreet. Public law claims must be anchored in statute or the common law, he argues, and the common law does not recognize such a constitutional remedy. He cites the minority concurring opinion of Lamer C.J. in Peel (51) for the proposition that constitutional relief outside of s. 24 cannot provide the remedy that is required in cases of ultra vires taxation. (52)

Smith is correct to the extent that damages are not usually awarded for constitutional breaches outside of the Charter context. I would concede that the normal public law remedies outside of the Charter would include a declaration of invalidity, reading down, reading in, severance, and so on, but not monetary awards. This does not mean, however, that monetary awards for the recovery of ultra vires taxation are without basis.

I would argue that courts are not prevented from ordering monetary payments for violations of constitutional norms outside of s. 24 of the Charter. There is no actual restraint on the courts' abilities to order the public law remedy that justice requires in the circumstances where the Constitution has been violated. I do not interpret the minority concurrence in Peel as conclusive proof otherwise. There is no theoretical reason why ordering the recovery of moneys collected pursuant to an ultra vires statute would be unavailable as a remedy. Under s. 52 of the Constitution Act, 1982, a court is fully within its authority to order the return of ultra vires taxes, which were collected in violation of either the division of powers in ss. 91 and 92 of the Constitution Act, 1867 or provisions relating to taxes in ss. 53 and 90. (53)

Smith's characterization of the availability of recovery does not adequately take into account the context-specific nature of constitutional remedies. As Kent Roach has written with respect to constitutional remedies generally, courts should select remedies depending on the context. He states that, "Both s. 24 of the Charter and s. 52 of the Constitution Act, 1982 invite judges to consider the relevant 'circumstances' in which they order remedies." (54) A contextual approach allows courts to craft the remedy that is appropriate to a particular situation.

The particular circumstances of cases of ultra vires taxation point in the direction of a constitutional remedy on a contextual approach. In these cases, there is a violation of one or more constitutional provisions. The rule of law and the fundamental right to no taxation without representation have been undermined by ultra vires legislation or by a statutory authority operating outside of the bounds of its enabling legislation. In other words, these taxes have been unjustly collected. Under these circumstances, a return of the moneys collected pursuant to the ultra vires tax is an appropriate remedy. On a contextual approach, such an award is within the legitimate discretion of the courts. An exclusively constitutional approach is therefore capable of not only analyzing ultra vires taxation cases, but of supplying the appropriate remedy where required. In these cases, it is constitutional principles that are primarily at stake and a public law remedy that is appropriate. In recent years, the Supreme Court has displayed tremendous creativity in its use of public law remedies--such as suspended declarations of invalidity--thus demonstrating the discretion it has in selecting remedies, as well as its willingness to use a broad set of remedial tools. (55)

If a constitutional remedy is to be applied in these cases, as largue it should, we must still be aware of the incentives that will be created for plaintiffs and governments. Benjamin Marie in his recent article, "Kingstreet Investments: Taking a Pass on the Defence of Passing On", (56) points out the problematic incentives that may exist. The more likely it is that a plaintiff will be legally entitled to recover moneys collected as ultra vires taxes by the government and the larger this amount is, the more likely the government will be to retroactively impose the tax if it is constitutionally possible to do so. If statutory limitation periods of otherwise general validity do not apply, as I will argue later in this article, the amount of potential recovery will be even greater and the incentives on the government to retroactively apply the tax will also increase. Furthermore, a rational potential plaintiff will take the government's likely actions into account. If it is a near certainty that governments will retroactively impose the unconstitutional tax in a valid fashion, then plaintiffs will have little or no incentive to go to court to assert their rights. Given these incentives, making the legal test for recovery of ultra vires taxes friendlier to the plaintiff may actually have the perverse effect of making recovery by the plaintiff of his or her money less likely.

One possible way to reduce these problematic incentives would be for courts to consider applying a constitutional exemption in appropriate circumstances. A constitutional exemption could potentially be granted to the plaintiff who succeeds in attaining recovery of ultra vires taxes with respect to any future legislation that would be enacted by the government to retroactively re-impose the tax in a valid fashion. The exemption could be granted in anticipation of the legislation that would almost certainly be passed by a legislature in response to a judicial decision ordering recovery of large amounts. The province of New Brunswick, for example, responded to the Supreme Court's decision in Kingstreet by retroactively imposing the tax in what is likely a constitutionally valid fashion. (57)

The possible use of constitutional exemptions in cases of ultra vires taxation is not far-fetched. Exemptions of a certain type have been applied in the context of suspended declarations of invalidity. When temporarily suspending a declaration that a legislative provision is unconstitutional, the Supreme Court has often crafted individual remedies for the applicant who has brought the unconstitutionality to the Court's attention. As Kent Roach writes, "The general rule established by the Supreme Court is that successful applicants should be exempted from the period of delay." (58) Only the successful applicant, in other words, gets the immediate benefit of a finding of unconstitutionality.

Yet, it is noteworthy that the use of constitutional exemptions is potentially problematic because it creates unfairness between similarly situated plaintiffs. (59) Only the first plaintiff to bring the case to court successfully will be insulated from retroactive imposition of the tax in a constitutionally valid fashion. Others who paid the tax would not be able to benefit from a judicial ruling that the tax is unconstitutional if retroactive legislation is passed. A constitutional exemption in respect of legislation retroactively imposing the tax would, therefore, provide a strong incentive for plaintiffs to go to court, but would create unfairness between the successful plaintiff and the others who paid the unconstitutional tax.

The merits and disadvantages of courts applying constitutional exemptions in this situation requires a much more detailed analysis than can be offered within the confines of this article. (60) Constitutional exemptions are, however, one possible way to at least partially reduce some of the perverse incentives that may be present if recovery by plaintiffs for significant amounts is likely to occur.

In summary, the restitution of ultra vires taxes is more properly considered an aspect of constitutional law, rather than part of a new third branch of the law of restitution, or entirely within the private law model presented by Lionel Smith. As Bastarache J. wrote regarding the law of restitution: "Some of the components of the modern doctrine [of unjust enrichment] are of little use to a principled disposition of the matter [of ultra vires taxation], but are rather liable to confuse the proper application of the key principles of constitutional law at issue." (61) Stated differently, a public law remedy that returns the unconstitutionally collected taxes is the appropriate remedy to apply. Positioning cases of the Kingstreet variety within the law of restitution merely adds to the potential confusion rather than detracting from it.

The 'Passing On' Defence

The defence of passing in the context of ultra vires taxes was introduced by La Forest J. in Air Canada, and this defence allows the state to escape the burden of repaying the unconstitutionally collected taxes. Justice Bastarache summarized the defence as follows:

   The basic premise of the passing-on defence is that if the taxpayer
   has passed on the burden of the tax payments to others, usually via
   price increases charged to its customers, the taxpayer has not
   suffered a deprivation, the taxing authority's enrichment was not
   at its expense, and it would receive a windfall if it were awarded
   recovery. (62)

The defence has attracted widespread criticism both in the case law and in commentaries. (63) At the New Brunswick Court of Appeal, the majority rejected the immunity rule but accepted the defence of passing on. In his judgment, Bastarache J. rejected the defence in its entirety in this area of law. He critiqued the defence for three reasons: (1) it is inconsistent with the law of restitution, (2) it is "economically misconceived", and (3) it is too difficult in practice to ascertain whether passing on has occurred or not. (64) Kingstreet held that it is inappropriate to deny relief on the basis of passing on in cases of ultra vires taxation. In other words, Bastarache J. rejected the defence "as generally inapplicable in the context of ultra vires taxes". (65)

Justice Bastarache rejected the defence in part because it is inconsistent with the basic principles of restitution law. The defence was created in order to prevent windfalls to the plaintiff. Windfalls, as La Forest J. held in Air Canada, are against the principles of restitution law. In contrast, deciding who may or may not receive a windfall is not and should not be a concern of the law of restitution. The law of restitution, in the words of Bastarache J. in Kingstreet, "is not founded on the concept of compensation for loss". (66)

Justice Bastarache reasoned that if La Forest J. was correct in holding that the law of restitution cannot provide windfalls to plaintiffs, then the defence should have been applied throughout the law of restitution. It has not. Prior to Air Canada, the defence was confined to cases of ultra vires taxation and mistake of law. Justice Bastarache cited Maddaugh and McCamus, who argue that the limited application of the defence is due to its theoretical failings:

   [T]he mere fact that the taxpayer has mistakenly paid, with its own
   money, the revenue authority is sufficient to establish an unjust
   enrichment at the plaintiff's expense. As between the taxpayer and
   the Crown, the question of whether the taxpayer has been able to
   recoup its loss from some other source is simply irrelevant. (67)

Justice Bastarache might have written more pointedly that by the logic of the passing on defence, no damages would ever occur in tort or contract law either, as the harm could nearly always be said to be passed on to consumers. He did, however, cite Lebel J. on this point from British Columbia v. Canadian Forest Products Ltd. that "the passing on defence would, in effect, result in an argument that no damages are ever recoverable in commercial litigation because anyone who claimed to have suffered damages but was still solvent had obviously found a way to pass the loss on". (68)

The second and third criticisms correctly, taken up in Kingstreet suggest that the defence is economically misconceived and, practically speaking, too difficult to prove. Taxpayers such as the bar owners may easily respond to tax levies by raising the price for consumers. If higher prices decreased sales, then the bar owners likely suffered a loss. If higher prices did not affect profits, then there is no conclusive way of proving that the price of a drink would not have been raised regardless. Proving that a fee has been passed on is therefore practically impossible and inconsistent with economic reality. Benjamin Alarie has demonstrated that, in economic terms, there is little merit in the passing on defence and the Court in Kingstreet was right to reject it for being economically misconceived. (69)

Kingstreet's rejection of the passing on defence was long overdue in the area of ultra vires taxation. The defence was inappropriate in this context and ill-fitting with accepted principles of private law. To bar recovery where an illegal fee, charge, or tax has been passed on is a misunderstanding of the law of restitution. The defence distorted a proper understanding of the relationship between the taxpayer and the taxing authority. That a tax has been passed on is no longer a valid defence in cases of ultra vires taxation.

The critiques provided by Bastarache J. are sufficiently persuasive that the validity of the defence in any other area of Canadian law is severely in doubt. If the passing on defence should be eliminated in cases of ultra vires taxation because of the aforementioned reasons, (70) then it should not be present in other areas of the law. The same reasons the defence is deficient in this context apply equally well to other areas of restitution and private law more generally. It is unlikely that this strong and persuasive criticism of the defence will be limited to the set of cases involving ultra vires taxes. Hopefully, Kingstreet signais the end of the misguided passing on defence more generally in Canadian law. This is a welcome development for the law of restitution and private law as well as the law on ultra vires taxation.

Limitation Periods and Ultra Vires Taxation

Though Bastarache J. decided in favour of recovery in Kingstreet, he applied the six-year limitation period found in the New Brunswick Limitation of Actions Act. The bar owners were only able to recover the ultra vires taxes that had been paid to the government during the six years prior to the filing of the claim on May 25, 2001. At the Court of Appeal, Robertson J.A. stated that if he was wrong about the existence of the passing on defence, the New Brunswick limitations statute should still apply.

I would argue that the application of the Limitation of Actions Act in this case was incorrect. The law in relation to limitation periods and constitutional remedies is generally unsettled. For remedies under the Charter, one commentator has noted that "[t]here is a remarkable paucity of judicial guidance on whether the remedy under section 24(1)